With more room to grow, California continues to account for outsized share of U.S. job growth

Unemployment Falls, But Labor Supply Struggles Endure

California’s labor market continued to expand at a steady pace in latest numbers, with total nonfarm employment in the state growing by 138,100 positions in February, according to an analysis released jointly by Beacon Economics and the UCR School of Business Center for Economic Forecasting and Development.

California’s job additions accounted for just over one-fifth of the nation’s net job gains for the month. January’s gains were also revised up to 60,300 in the latest numbers, a 6,700 increase from the preliminary estimate of 53,600.

While California added jobs at a healthy pace in 2021, as of February 2022, the state has still only recovered 87.2% of the jobs that were lost in March and April 2020, and there are currently 353,000 fewer people employed in California compared to pre-pandemic February 2020. Total nonfarm employment in the state has contracted 2.0% since that time compared to a 1.4% drop nationally. With a larger portion of its workforce to be recovered, California’s job growth over the past year has been more robust with payrolls increasing 6.8% from February 2021 to February 2022, well above the nation’s 4.6% increase over the same period.

“California’s labor market has had a very encouraging start to the year,” said Taner Osman, Research Manager at Beacon Economics and the Center for Economic Forecasting. ““And now that many of the public health mandates restricting activity have been removed, and there is a jobs deficit in the state compared to the nation, we should continue to see strong job growth in the coming months.”

The state’s unemployment rate fell to 5.4% in the latest numbers, a 0.3 percentage-point decline from the previous month. California’s unemployment rate remains elevated relative to the 3.8% rate in the United States overall as the state continues to struggle with its labor supply. Since February 2020, the state’s workforce has fallen by 455,000 workers, a 2.3% decline.

Industry Profile  

• At the industry level, the largest jobs gains continue to occur in the sectors hardest hit by the pandemic. While California has made up significant ground in recent months, employment levels in many of these sectors remain below their pre-pandemic levels and should continue to steadily gain back jobs over the coming months.
• Leisure and Hospitality led payrolls gains in February, expanding by 30,400 positions. The Leisure and Hospitality sector still has a long way to go to recover all of the jobs lost due to the pandemic, with payrolls still down 10.4% from February 2020.
• Other sectors posting strong gains during the month were Construction (22,100), Health Care (19,100), Administrative Support (14,000), Retail Trade (13,400), Transportation, Warehousing, and Utilities (13,300), Government (6,40), Manufacturing (5,900), and Other Services (5,600). Transportation, Warehousing, and Utilities have been a major driver of growth in the state, with payrolls up 14.9%, respectively ,since February 2020.
• Professional, Scientific, and Technical Services (-800) was the only sector to post losses during the month. Despite the one-month decline, payrolls in this sector are up 1.7% since February 2020.

Regional Profile

• Regionally, job gains were led by Southern California. Los Angeles (MD) saw the largest increase, where payrolls grew by 31,500 (0.7%) during the month. The Inland Empire (12,200 or 0.8%), Orange County (11,000 or 0.7%), San Diego (7,200 or 0.5%), and Ventura (900 or 0.3%) also saw their payrolls jump during the month. The Inland Empire (117.6%) has experienced the strongest recovery in the region measured by the percentage of jobs recovered from April 2020 to February 2022 relative to jobs lost from February 2020 to April 2020. The IE is followed by El Centro (100%), San Diego (89.7%), Los Angeles (MD) (81.5%), Orange County (78.7%), and Ventura (72.4%).
• In the Bay Area, San Francisco (MD experienced the largest increase, with payrolls expanding by 7,700 (0.7%) positions in February. The East Bay (6,800 or 0.6%), San Jose (4,800 or 0.4%), Santa Rosa (1,400 or 0.7%), and Vallejo (1,000 or 0.7%) also saw payrolls expand during the month. Since April 2020, San Jose (79.7%) has experienced the strongest recovery in the region, followed by the East Bay (79.2%), Napa (77.2%), Santa Rosa (77.0%), San Francisco (MD) (71.4%), Vallejo (67.4%), and San Rafael (MD) (61.8%).
• In the Central Valley, Sacramento experienced the largest monthly increase as payrolls expanded by 7,300 (0.7%) positions in February. Payrolls in Bakersfield (1,900 or 0.7%), Fresno (1,500 or 0.4%), Modesto (900 or 0.5%), Stockton (800 or 0.3%), Redding (600 or 0.9%), Chico (500 or 0.5%), and Visalia (500 or 0.4%) increased steadily as well. Since April 2020, Stockton (122.3%) has experienced the strongest recovery in the region, followed by Yuba (120%), Visalia (119.3%), Madera (112%), Redding (101.3%), Sacramento (100.9%), and Fresno (98.5%).
• On California’s Central Coast, Salinas added the largest number of jobs, with payrolls increasing by 2,700 (2.0%) during the month. San Luis Obispo (800 or 0.7%), Santa Barbara (500 or 0.3%), Santa Cruz (200 or 0.2%) also saw payrolls expand. Since April 2020, and San Luis Obispo (89.3%) has experienced the strongest recovery in the region, followed by Santa Barbara (83.9%), Santa Cruz (80.9%), and Salinas (80.8%).